Analys från DailyFX
Gold Prices: Are You Not Entertained?
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Talking Points:
- Gold Technical Strategy: Short, first target of previous setup met, next target at $1,050.
- Gold is currently sitting near six-year lows; and this is unattractive for new short positions. But previous support may come in as resistance in the early portion of next week, and this can provide motive for down-side triggers.
- Price action is finally nearing support of the 2+ year trend-channel, and that projects to approximately $1,050 for the next week.
To explain the price action seen in the Gold prices over the past month and a half, we had to borrow this article’s title from Russell Crowe’s performance in the film Gladiator. Because that’s pretty much what we’ve seen in Gold prices as this December rate hike from the Federal Reserve continues to get priced into markets: It’s been pure and utter carnage.
Since that pivot in the middle of October in which a December rate hike from the Fed went from a minimal possibility to a likely probability, we’ve seen Gold run lower by over 11%, and we’ve seen 25 of the past 32 days trade off. Numerous support levels have been smashed during this descent, and this has made short-side entries rather complicated as even retracements have been sold heavily. In our last article, we identified an aggressive short-setup off of a key level of resistance at $1,087.05. This is the 50% Fibonacci retracement of the ‘big picture’ move in Gold, taking the 1999 low at $253.30 up to the 2011 high at $1,920.80. And since then, we’ve seen Gold prices continue to react lower, and the first target has been met at the prior low of $1,063.84. The second target remains at $1,050, and given next week’s trove of upcoming data, this target could be soundly met in the early portion of next week.
But, on the prospect of new positions, we’re very much in the same situation that we were in when we discussed a similar movement in Gold prices in the article, The Carnage Continues in Gold Prices, and You Have 3 Choices. At the time of publishing that article, Gold had just broken below the previous 2015-low at $1,071.28. And as we advised in that article, it would probably be more accomodating to wait on the short-setup; let prices retrace so a more adequate entry could be taken with resistance offering risk management levels. A mere four days later, Gold prices had retraced to that $1,087.05 level and an aggressive short entry was possible.
Moving forward, particularly in the early portion of next week, patience may be the most recommended way of approaching the Gold market, in order to let prices retrace to a more amenable area of entry for new short positions.
Potential levels of re-entry for short Gold positions could be sought in the vicinity of prior support levels. So, the most aggressive re-entry level would be that most recent low of $1,063.84, but deeper retracements could be sought out at $1,071.28 (the previous July low), or even back to that $1,087.05 Fibonacci level. Traders can look to cast stops above the next resistance level, with a target cast towards previous lows. The current swing-low of $1,052.60 would be an attractive profit target, as this could allow a trader to clear off a portion of the trade before running into psychological support at the $1,050 area, which is the projection of the 2+ year bearish trend channel that’s continuing to work in Gold.
Created with Marketscope/Trading Station II; prepared by James Stanley
— Written by James Stanley, Analyst for DailyFX.com
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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